Judge: Michael E. Whitaker, Case: 22SMCV01809, Date: 2023-10-06 Tentative Ruling
Case Number: 22SMCV01809 Hearing Date: October 6, 2023 Dept: 207
TENTATIVE
RULING
|
DEPARTMENT |
207 |
|
HEARING DATE |
October
6, 2023 |
|
CASE NUMBER |
22SMCV01809 |
|
MOTION |
Motion
for Appointment of Receiver |
|
MOVING PARTIES |
Plaintiffs
People of the State of California and City of West Hollywood |
|
OPPOSING PARTY |
Defendant
Fred Behfarin |
MOVING PAPERS:
OPPOSITION PAPERS:
REPLY PAPERS:
PARTIES
Defendant
DH Distribution (“DH”) is a California Corporation, and current owner of the
title to the subject property.
(Complaint ¶ 5; Rivas Decl. ¶ 7; RJN Ex. C). Defendant Sergey Menshikov (“Sergey”) is the
principal of DH. (Rivas Decl. ¶ 8.) As Sergey currently resides in Russia,
Sergey’s daughters, Defendants Lucy Menshikova (“Lucy”) and Larisa Menshikova
(“Larissa”) have acted as Sergey’s agent, and control the subject property. (Rivas Decl. ¶¶ 8, 24, 28, 34.)
Defendant Fred Behfarin (“Behfarin”) is a prospective purchaser of the
property. (Rivas Decl. ¶ 24.) Behfarin has sued DH, Sergey, Lucy, Larisa,
and an escrow company in related case number 23STCV00692 to enforce a contract
to purchase the subject property. In
connection with that action, Behfarin has three recorded Liens on the property:
“1) recorded Lis Pendens for purchase of the property, 2) recorded Deed of
Trust, securing Note in the amount of $665,000.00, and 3) recorded Memorandum
of Agreement[.]” (Behfarin Decl. ¶
3.)
Plaintiffs State of California and City of West Hollywood
(“Plaintiffs”) assert an interest in ensuring that vacant properties, such as
the subject property, are maintained in accordance with state and local law, do
not become a nuisance or pose threats to the health or safety of the public.
(Complaint ¶¶ 3-4, 16, 18-22, 26-41.)
MOTION
Plaintiffs filed suit against Defendants for (1) public nuisance; (2)
municipal code violations; and (3) declaratory and injunctive relief,
pertaining to real property located in West Hollywood in which Defendants claim
an ownership interest. Plaintiffs now
move for appointment of a receiver to maintain the property during the pendency
of the legal dispute. Behfarin opposes
the motion and Plaintiffs have replied.
LEGAL STANDARDS
“The appointment of a
receiver is an ancillary proceeding concerned with the preservation of the
property subject to litigation pending its ultimate disposition pursuant to
final judgment. A receiver is not an agent of either party to the action but
represents all persons interested in the property involved[.]” (Maggiora v. Palo Alto Inn, Inc.
(1967) 249 Cal.App.2d 706, 711–712.)
A receivership is a
provisional remedy “to preserve and manage the property during the course of
the receivership.” (Southern
California Sunbelt Developers, Inc. v. Banyan Limited Partnership (2017) 8
Cal.App.5th 910, 922, 925.) A court may
appoint a receiver in all cases where necessary to preserve the property or the
rights of any party. (Code Civ. Proc., §
564, subd. (b)(9); Baron v. Fire Ins. Exchange (2007) 154 Cal.App.4th
1184, 1191.)
“The appointment of a
receiver is a drastic remedy[.]” (Hoover
v. Galbraith (1972) 7 Cal.3d 519, 528.)
“[T]he provisional remedy of receivership is utilized sparingly and only
upon a compelling showing of need[.] (IFS
Industries, Inc. v. Stephens (1984) 159 Cal.App.3d 740, 756.) “[R]eceivers are often legal luxuries,
frequently representing an extravagant cost to a losing litigant. When it
appears that no reasonably certain benefit will result to one litigant, and a
distinct disadvantage will result to another, courts should weigh carefully the
propriety of appointing a receiver.” (City
& County of San Francisco v. Daley (1993) 16 Cal.App.4th 734, 744
(hereafter Daley).) In light of
the potential expense and hardship to the parties, courts must “carefully weigh
the propriety of such appointment in exercising their discretion to appoint a
receiver particularly if there is an alternative remedy.” (Hoover v. Galbraith, supra, 7
Cal.3d at p. 528.)
“Ordinarily, if there is
any other remedy, less severe in its results, which will adequately protect the
rights of the parties, a court should not take property out of the hands of its
owners. (Golden State Glass Corp. v.
Superior Court of Los Angeles County (1939) 13 Cal.2d 384, 393.) However, the availability of other remedies
does not, in and of itself, preclude a court from appointing a receiver,
particularly where other remedies have been pursued without success. (Gold v. Gold Realty Co. (2003) 114
Cal.App.4th 791, 807; Daley, supra, 16 Cal.App.4th at p. 745.)
EVIDENCE
Plaintiffs’ Request for Judicial
Notice
Plaintiffs request the Court take
judicial notice of:
(1)
The existence and contents of the Grant Deed to D H
Distribution, Inc., dated October 26, 2012, and recorded on November 9, 2012,
as document number 20121705572, in the Official Records Recorder’s Office, for
Los Angeles County.
(2)
West Hollywood Municipal Code sections 1.085.080,
1.32.010, 1.32.060, 9.60.040, 9.64.010, and 9.64.020.
(3)
The existence and contents of the Memorandum of
Agreement, dated November 20, 2019, and recorded on November 25, 2019, as
document number 20191294121, in the Official Records Recorder’s Office, for Los
Angeles County.
Plaintiffs’
request for judicial notice is unopposed.
Courts can take judicial
notice of the existence and recordation of real property records, including
deeds, if authenticity is not reasonably disputed. (Fontenot v. Wells Fargo Bank, N.A.
(2011) 198 Cal.App.4th 256, 264-265.)
“The official act of recordation and the common use of a notary public
in the execution of such documents assure their reliability, and the
maintenance of the documents in the recorder’s office makes their existence and
text capable of ready confirmation, thereby placing such documents beyond
reasonable dispute.” (Ibid.) Moreover, courts can take judicial notice not
only of the existence and recordation of recorded documents but also matters
that can be deduced from the documents, including the parties, dates, and legal
consequences of recorded documents relating to real estate transactions. (Ibid.)
Therefore, the Court takes
judicial notice of the Grant Deed and recorded Memorandum of Agreement (RJN
Nos. 1 and 3.)
With respect to the West
Hollywood Municipal Code sections, the Court may properly take judicial notice
of “[r]egulations and legislative enactments issued by or under the authority
of the United States or any public entity in the United States.” (Evid. Code, § 452, subd. (b).) In particular, local ordinances are properly
the subject of judicial notice under Evidence Code, section 452, subdivision
(b). (Martin v. City of Corning (1972)
25 Cal.App.3d 165, 167, fn. 1.)
Therefore, the Court takes
judicial notice of the requested sections of the West Hollywood Municipal Code.
DISCUSSION
Plaintiffs
request an order (1) declaring the subject property to be a public nuisance in
violation of state and local laws; (2) appointing Blake C. Alsbrook as receiver
over the subject property; (3) granting the receiver authority to “manage and
oversee the rehabilitation of the subject property;” (4) authorizing the
receiver to “secure funding for the receivership estate through the issuance of
Receiver’s certificates that may be recorded as first propriety liens on the
subject property;” and (5) “authorizing the recovery of the City’s costs,
expenses, and attorney’s fees out of the receivership estate.” (Notice of Motion at p. 1.)
In support of their motion,
Plaintiffs have provided the 56-paragraph declaration of the Director of
Community Safety for the City of West Hollywood, Danny Rivas, which provides a
detailed account of the numerous records, inspections, communications, and
administrative actions concerning the ongoing substandard condition and
maintenance of the subject property since 2014, including a small fire that
broke out on the premises in March 2022, as a result of an unhoused person
attempting to keep warm by starting a fire on the living room floor. (Rivas Decl. ¶ 35.)
The Rivas Declaration also indicates that unhoused individuals
regularly break into the subject property, and neighbors routinely call the
City to report issues these individuals cause.
(Rivas Decl. ¶¶ 11, 13, 16, 23, 25, 35, 38, 49, 50, 53.) On June 3, 2022, DH, Sergey, and Larisa were
each issued a Notice to Abate Nuisances.
(Rivas Decl. ¶ 44.) On June 27,
2022, the West Hollywood City Council adopted Resolution No. 22-5535, declaring
the Subject Property a nuisance, and ordered abatement of the code violations. (Rivas Decl. ¶ 46 and Ex. L.) On August 23, 2023, City staff observed an
active beehive at the subject property.
(Rivas Decl. ¶ 49.)
Plaintiffs argue that a receivership
is appropriate because they have exhausted all other remedies, including
pre-litigation code enforcements, notices, letters, meetings, and filing this
action, yet Defendants have not maintained the property in conformance with the
requirements of the City’s municipal code.
As a result, the condition of the property continues to deteriorate,
costing City resources and posing ongoing health and safety threats to the
public.
Behfarin opposes the motion, arguing that
unlike Defendants DH, Sergey, Lucy, and Larissa, Behfarin did not receive or
ignore any of the City’s prior notices. (Opp.
at p. 2:21-3:13; Behfarin Decl. ¶ 4.) Rather,
Behfarin is a prospective purchaser of the property, and there is
currently a pending lawsuit to determine his ownership interest (if any) in the
subject property. (Opp. at p. 2.) Behfarin is not the current owner of the
subject property.
Behfarin
also argues that “[t]he proposed Appointment of the Receiver and request for
‘Priority of Lien’ totally undermines my three (3) recorded Liens on the
subject property and is extremely prejudicial to my interest” as a prospective purchaser of the property.
Behfarin argues that he
“remains willing and able to cure the violations and secure the [subject
property] from criminal activity.” (Opp.
at p. 4.) However, Behfarin describes several
reasons why he is currently unable to abate the issues with the property,
including that (1) DH rejected and ignored his offers to pay for the permits
and the cost of demolishing the subject property; (2) DH did not respond
positively to Behfarin’s request to explore settling the dispute over ownership
of the subject property; and (3) the City has not yet issued him the requested
permits. With respect to the permits, as
the City points out in reply, it cannot currently issue permits to Behfarin, as
he is not the current owner of the subject property, even if he able to fund
the “100% of the demolition cost.” Thus,
Behfarin’s ability to obtain permits is contingent upon the ultimate resolution
of the related case in Behfarin’s favor, and the subsequent sale and
transfer of the property to him.
Behfarin also objects to the
proposed receiver on the basis that he has a conflict of interest because the
law firm the proposed receiver works for, Ervin, Cohen & Jessup,
represented Behfarin in the case Behfarin v. Bank of America. (Behfarin Decl. ¶ 6.) Plaintiffs point out in Reply that (1) the
proposed receiver himself never represented Behfarin, and (2) the
representation occurred forty years ago.
Appropriateness of
Appointing a Receiver
In light of the foregoing, the Court finds
the extraordinary remedy of appointing a receiver appropriate. Plaintiffs have provided ample evidence that Defendants,
and each of them, have been and continue to be unable to adequately preserve
and manage the subject property.
Moreover,
there are no lesser remedies available.
The City has already sent letters, held meetings, issued violations, and
ordered DH, Sergey, Larisa, and Lucy to improve the conditions of the subject
property in conformance with the city ordinances. Thus, all potential lesser remedies have been
unsuccessfully tried and exhausted.
Behfarin
argues that he is able and willing to pay to demolish the structures on the
property, but his ability to do so hinges on the outcome of pending litigation
between Behfarin and the other DH related defendants to this action, which is
still at the pleadings stage.
Thus,
the property remains in limbo, deteriorating, and posing ongoing and increasing
threats to the health and safety of nearby residents.
Plaintiffs have not cited any
authority requiring the Court to issue an order declaring the subject property
a nuisance as a matter of law as a condition precedent to ordering the
appointment of a receiver, and the Court declines to do so at this stage. In Daley, the case was in a different
procedural posture because the property had already been adjudged a nuisance in
a separate action, and Defendant had been ordered to abate the nuisance, but
failed to do so. (Daley, supra,
16 Cal. App. 4th at pp. 737-738.) But
nothing in Code of Civil Procedure Section 564, subdivision (b)(9) requires
that a court make a preliminary determination that the property is a nuisance
as a matter of law. Plaintiffs may
pursue the first cause of action alleged in the complaint (public nuisance)
through a motion for summary judgment/adjudication and/or trial.
Scope of Receiver’s
Authority
In
light of the fact that Defendants apparently all desire to demolish the subject
property, (see Rivas Decl. ¶ 30-34; Behfarin Decl. ¶¶ 5, 7), the Court clarifies
that the receiver shall have the authority to manage and oversee the
rehabilitation or demolition of the subject property, as
appropriate. (See City of Santa
Monica v. Gonzalez (2008) 43 Cal.4th 905, 916 [court granted receiver power
to “rehabilitate or demolish” the property].)
In particular, to protect the interests of all Defendants, the Court
shall require the receiver to conduct a study of the estimated cost of repairs
versus demolition and report to the court on the feasibility of each approach,
prior to beginning any repairs. Thus,
the receiver will protect the interests of all parties, by abating the City’s concerns,
while maintaining the property (whether through rehabilitation or demolition)
for the benefit of Defendants, who currently lack the ability to do so
themselves.
Receiver’s
Liens
Further,
although the receiver’s lien will take first priority over Behfarin’s liens,
they involve the costs to rehabilitate or demolish subject property, as
Behfarin would ultimately be required to expend anyway, should he ultimately be
determined the rightful owner of the subject property.
Proposed
Receiver’s Conflict of Interest
With respect to the proposed
receiver, the Court finds there is no conflict of interest. Black C. Alsbrook has never represented
Behfarin. Moreover, the receiver will
not represent interests adverse to Behfarin’s.
Rather, the receiver will rehabilitate or demolish the subject property,
as appropriate, that Behfarin claims an ownership interest in, during the
pendency of the disputes. Furthermore,
because the proposed receiver’s law firm previously represented Behfarin, the
potential conflict, if any, would stem from concerns that the receiver would
show preferential treatment to Behfarin, but Plaintiffs do not object to the
proposed receiver on this basis.
Other Orders
The
Court notes that the proposed order Plaintiffs have filed include several
orders not currently briefed or otherwise currently before the court. Specifically, Plaintiffs request an order
that the City is entitled to recover reasonable attorney fees and costs as
authorized by the West Hollywood Municipal Code (¶ 5); various injunctive
relief with respect to Defendants (¶¶ 6-7); and authorization to issue an
initial certificate of indebtedness, not to exceed $40,000 (¶ 8.) Because these issues have not been properly
briefed or brought before the Court, the Court declines to issue orders
granting the requested relief.
CONCLUSION AND ORDER
In
light of the uncontroverted evidence that Defendants currently lack the ability
to preserve and manage the subject property, that Plaintiffs have already
exhausted all lesser remedies without success, and that the subject property
continues to deteriorate and pose an ongoing health and safety threat to the
public during the pendency of litigation in this action and the related action,
the Court grants Plaintiffs’ motion to appoint Blake C. Alsbrook as receiver of
the subject property, with the authority to manage and oversee the
rehabilitation or demolition of the subject property, as appropriate. In light of Defendants’ stated desire to
demolish the structures on the subject property, the receiver shall conduct a
study on the estimated costs and feasibility of repairs versus demolition prior
to beginning any repairs.
Plaintiffs
shall lodge and serve an amended proposed order in conformity with the Court’s
ruling on or before October 13, 2023, and any objections to the amended
proposed order shall be filed and served on or before October 18, 2023.
Further,
the Court sets a Status Conference regarding the receivership on December 8,
2023 at 8:30 A.M. in Department 207. The
Receiver, Blake C. Alsbrook, shall file and serve on or before December 6,
2023, a preliminary report on the status of the subject property and the
anticipated course of action based upon the Receiver’s initial assessment.
Plaintiffs
shall give notice of the Court’s ruling and file a proof of service of such.
DATED: October 5, 2023 ________________________________
Michael
E. Whitaker
Judge
of the Superior Court